NZD/USD falls below 0.6900 as surging US yields push buck higher across the board

• NZD/USD fell under 0.6900 on Thursday as the US dollar gained ground across the board amid surging US yields.
• Bond markets are reacting to recent Fed hawkishness, while the kiwi has been hurt by lower equity and commodity prices.
• But the longer-term technicals remain positive for the kiwi, with an uptrend from late January still in play.

NZD/USD fell for a second straight session on Thursday and dipped below its 200 and 21-Day Moving Averages, both of which reside just to the north of the 0.6900 level, as well as dipping below the big figure. The selling pressure has eased in recent hours, with NZD/USD bottoming out in the 0.6880s, with some buying ahead of late March lows in the 0.6875 area offering some support.

Kiwi underperformance versus the US dollar on Thursday was roughly in line with that of its risk appetite/commodity-sensitive G10 peers the Aussie and the loonie, all of which have suffered amid declining equity/commodity prices in recent days. But NZD/USD dip back under 0.6900 isn’t just a kiwi story. With US yields (particularly at the long-end) continuing to surge higher as traders react to hawkish rhetoric from the Fed this week, the US dollar is on the front foot across the board.

From a technical perspective, things are far from catastrophic for NZD/USD. The pair remains in an uptrend that has been in play since the late January lows under 0.6600, and would have to fall all the way to the mid-0.6800s to test this uptrend. And before getting that far, the pair would have to break below a key balance area in the 0.6875 region.

If sentiment in commodity and equity markets stabilises next week, that would be a plus for the kiwi, which might also get a lift if the RBNZ comes out firing with a 50 bps rate hike and hawkish rate guidance at its upcoming meeting. But NZD/USD traders should also be on notice for US Consumer and Producer Price inflation figures which, if ugly (as many expect), will exert further pressure on the Fed to tighten monetary policy rapidly.